On January $1,2020,$ James Company purchased $100$ percent of the outstanding voting stock of Nolan, Inc., for $$1,000,000$ in cash and other consideration. At the purchase date, Nolan had common stock of $$500,000$ and retained earnings of $$185,000.$ James attributed the excess of acquisition$-$date fair value over Nolan's book value to a trade name with an estimated $25-$year remaining useful life. James uses the equity method to account for its investment in Nolan.

During the next two years, Nolan reported the following:

Case $2-$ Image $1$

Nolan sells inventory to James after a markup based on a gross profit rate. At the end of $2020$ and $2021,30$ percent of the current year purchases remain in James's inventory.

Using the attached Excel template, compute the following:

The Equity Method balance in James' Investment in Nolan, Inc., account as of December $31,2021$

Worksheet adjustments for the December $31,2021$ adjustments of James and Nolan. Use the following Codes to designate the purpose of the journal entry:

Journal Entry Legend

Formulate your solution so that Nolan's gross profit rate on sales to James is treated as a variable.

The Excel Template for this assignment can be accessed by clicking on this linkLinks to an external site..